When buying a property, it is important to know how much it is going to cost. There are many factors to consider when buying a property, from the down payment and fees to the smaller costs involved, such as when you may need to pay a pro-rata refund of service charges to the seller.

What are the transactional costs, and what are they for?

DLD stands for Dubai Land Department.

When purchasing a property, you must pay a 4% + 580 AED transfer fee, which is usually paid by the buyer.

When taking a mortgage, you will be required to pay 0.25% + 290 AED of the loan amount in fees to register the mortgage against the property, which is made mandatory by the lender.

If you are using a real estate agent, the industry standard is 2% + VAT. There are occasions where this may differ.

Trustee fees to complete the transaction are fixed at 4,200 AED + VAT. The trustees verify your documents and complete the transaction by fulfilling the Dubai Land Department's requirements.

It is important to note that each transaction is different and may incur further costs, which we advise you to make clear with the seller and/or agent prior to entering into a sales agreement.

What additional costs may be incurred?

You will find that each transaction when buying a property will likely be unique in different ways. It is important to know if the seller currently has finance against the property or if it is unencumbered (owned with cash).

In the event that there is finance outstanding on the property, it may be requested that a blocking take place, which blocks the property from sale when a buyer is clearing a seller's mortgage prior to transfer. This is an additional cost of 1,520 AED + 25 AED.

• Service charges - Most developers, upon requesting a NOC, will request an advance payment of service charges. This can be paid up to a year in advance. On the day of transfer, a pro-rata refund is often requested by the seller for amounts paid in advance, which are calculated on a daily basis. Prior to making a purchase, always inquire about the property's service charges.
• Rent refunds - In the event the property is rented, there may be instances where the seller is due to pay the buyer a pro-rata refund on amounts paid by the tenant. For example, if the tenant has paid a year in full and the property is sold six months into the agreement, the remaining six months should be paid forward to the new owner. It is advised that the terms of this should be outlined in the sales contract to avoid any confusion.
• Connection fees - You will likely be required to place deposits to connect your electricity, water, and AC. These fees vary by provider and type of property. When viewing a property, it is important.

How can I reduce my total upfront cost, and why would I?

Many of the costs required are mandatory when buying a property, but there are ways in which we can reduce the total upfront costs. It is important to understand what this means.

Some lenders will allow you to add a percentage of the fees to the mortgage. This could reduce your buying costs (not including the down payment) by up to 85%.

How does this work? The bank will add the value to your loan amount, which may increase your monthly payment marginally and the total cost paid over the term of the loan.

Would adding fees to my loan be a good option?

When adding fees to your mortgage loan, it will reduce the upfront cost required to buy a property, which can increase your buying potential. Given the low interest rates available in the UAE, this can be beneficial.

Further to this, many buyers will want to have a safety reserve of funds for home renovations and ongoing maintenance costs, so adding some if not all of the allowed purchase fees to the loan will provide comfort in having more cash in your pocket.

To find out how this would look, you can make an application within minutes through the useholo.com platform, which compares all the options and provides an instant cost breakdown and eligible products all in one place.

This blog is for educational purposes, but everyone's case is unique, and local guidelines and regulations may change. Our mortgage advisors can help you with any question you may have and have the latest advice. Get in touch.